Raphael Inaki S.

Valenzuela
12070084

- - - Cash Flow Statement - - -

Activity Entry Source of Cash Use of Cash

Operations Net Income 7

Operations Depreciation 5

Operations Accounts Receivable 7

Operations Inventories 3

Operations Accounts Payable 3

Operations Accrued Taxes 2

Investing Fixed Assets (dep’n added) 10

Investing Other Assets 3

Financing Notes Payable 20

Financing Long-Term Debt 15

Financing Common Stock 6

Financing Dividends 3

TOTAL 41 43

Cash = $3 - $5 = -$2 2

Activity Entry Source of Cash Use of Cash

Operations Net Income 15

Operations Depreciation 3

Operations Accounts Receivable 3

 Operations Inventories 3

Operations Accounts Payable 2

Operations Accrued Wages 1

Operations Accrued Taxes 1

Investing Net Plant (dep’n added) 3

Investing Dividends 10

TOTAL 21 20

Cash = $5 - $4 = $1 1

Beginning Net Income + Net Income - Dividends = Retained Earnings 12/31 19x2
15,000,000 + 15,000,000 - X = 20,000,000
Dividends, X = 10,000,000

Sennet Company, cont.

Net Operating Working Capital (19x1)
𝑁𝑂𝑊𝐶 = 𝐴𝑙𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝐴𝑙𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑡ℎ𝑎𝑡 𝑑𝑜𝑛’𝑡 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑁𝑂𝑊𝐶 = $23 − ($8 + $2 + $3)
𝑁𝑂𝑊𝐶 = $23 − $13
𝑁𝑂𝑊𝐶 = $10

Total Operating Capital (19x1)

𝑇𝑂𝐶 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐵𝑒𝑎𝑟𝑖𝑛𝑔 𝐷𝑒𝑏𝑡 + 𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 (𝑆/𝐸)
𝑇𝑂𝐶 = $25 + $25
𝑇𝑂𝐶 = $50

Free Cash Flow (19x2)

𝐹𝐶𝐹 = 𝑁𝑂𝑃𝐴𝑇 − 𝑁𝑒𝑡 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑖𝑛 𝑂𝑝𝑡𝑔. 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝑁𝑂𝑃𝐴𝑇 = $27(1 − 2/5)
𝑁𝑂𝑃𝐴𝑇 = $16. 2
𝐹𝐶𝐹 = $16. 2 − $5
𝐹𝐶𝐹 = $11. 2
 - - - Financial Ratio - - -

1. Current Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠/𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = $303/$111
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 2. 73
2. Debt/total assets
$24/$450 = 5. 33%

3. Times interest earned

𝑇𝐼𝐸 = 𝐸𝐵𝐼𝑇/𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
𝑇𝐼𝐸 = $49. 5/$4. 5
𝑇𝐼𝐸 = $49. 5/$4. 5
𝑇𝐼𝐸 = 11

4. EBITDA coverage
𝐸𝐵𝐼𝑇𝐷𝐴 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝐸𝐵𝐼𝑇𝐷𝐴/𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
𝐸𝐵𝐼𝑇𝐷𝐴 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 = $61. 5/$4. 5
𝐸𝐵𝐼𝑇𝐷𝐴 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 = 13. 67

5. Sales/Inventory
$795/$159 = 5

6. Days sales outstanding

𝐷𝑆𝑂 = 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒/(𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠/360)
𝐷𝑆𝑂 = $66/($795/360)
𝐷𝑆𝑂 = 30 𝑑𝑎𝑦𝑠

7. Sales/fixed assets
$795/$147 = 5. 41

8. Sales/total assets
$795/$450 = 1. 77

9. Profit margin on sales

𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡/𝑆𝑎𝑙𝑒𝑠
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = $135/$795
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = 16. 98%

10. Return on total assets

𝑅𝑂𝐴 = 𝑁𝐼𝐴𝑇/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑅𝑂𝐴 = $27/$450
𝑅𝑂𝐴 = 6%

11. Return on common equity

𝑅𝑂𝐸 = 𝑁𝐼𝐴𝑇/𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑡𝑜 𝐶𝑜𝑚𝑚𝑜𝑛/(𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘 + 𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠)
𝑅𝑂𝐸 = $27/$315
𝑅𝑂𝐸 = 8. 57%
Ratio Ferri Furniture Company Industry Average

1. Current ratio 2.73 x 2x

2. Debt/total assets 5.33% 30%

3. Times interest earned 11 x 7x

4. EBITDA coverage 13.67 x 9x

5. Sales/Inventory 5 10 x

6. Days sales outstanding 30 days 24 days

7. Sales/fixed assets 5.41 x 6x

8. Sales/total assets 1.77 x 3x

9. Profit margin on sales 16.98% 3%

10. Return on total assets 6% 9%

11. Return on common equity 8.57% 12.9%

1. Quick ratio
𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 = 𝑀𝑜𝑛𝑒𝑡𝑎𝑟𝑦 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠/𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 = ($72, 000 + $439, 000)/$602, 000
𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 = 0. 85

2. Current ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠/𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = $1, 405, 000/$602, 000
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 2. 33

3. Inventory turnover
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠/𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = $3, 580, 000/$894, 000
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 4

4. Days sales outstanding

𝐷𝑆𝑂 = 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒/(𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠/360)
𝐷𝑆𝑂 = $439, 000/($4, 290, 000/360)
𝐷𝑆𝑂 = 37 𝑑𝑎𝑦𝑠

5. Fixed assets turnover

𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = $4, 290, 000/$431, 000
 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 9. 95

6. Total assets turnover

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = $4, 290, 000/$1, 836, 000
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 2. 34

7. Return on assets
𝑅𝑂𝐴 = 𝑁𝐼𝐴𝑇/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑅𝑂𝐴 = $108, 408/$1, 836, 000
𝑅𝑂𝐴 = 5. 9%

8. Return on equity
𝑅𝑂𝐸 = 𝑁𝐼𝐴𝑇/𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑖𝑒𝑠
𝑅𝑂𝐸 = $108, 408/($575, 000 + $254, 710)
𝑅𝑂𝐸 = 13. 07%

9. Debt ratio
𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐷𝑒𝑏𝑡/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = $404, 290/$1, 836, 000
𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = 22. 02%

10. Profit margin on sales

𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡/𝑆𝑎𝑙𝑒𝑠
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = $710, 000/$4, 290, 000
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 = 16. 6%

11. P/E ratio

𝑃/𝐸 𝑅𝑎𝑡𝑖𝑜 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑆ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒/𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 (𝐸𝑃𝑆)
𝑃/𝐸 𝑅𝑎𝑡𝑖𝑜 = $23. 57/$4. 71
𝑃/𝐸 𝑅𝑎𝑡𝑖𝑜 = 5

12. Price/cash flow ratio

𝑃/𝐶𝐹 𝑅𝑎𝑡𝑖𝑜 = 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒/𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
𝑃/𝐶𝐹 𝑅𝑎𝑡𝑖𝑜 = 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒/(𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤/𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔)
𝑃/𝐶𝐹 𝑅𝑎𝑡𝑖𝑜 = $23. 7/($575, 000/23, 000)
𝑃/𝐶𝐹 𝑅𝑎𝑡𝑖𝑜 = 0. 948

Ratio Corrigan Corporation Industry Average

1. Quick ratio 0.85 x 1.0 x

2. Current ratio 2.33 x 2.7 x

3. Inventory turnover 4.0 x 7.0 x

4. Days sales outstanding 37 days 32 days

5. Fixed assets turnover 9.95 x 13.0 x

6. Total assets turnover 2.34 x 2.6 x

7. Return on assets 5.9% 9.1%

8. Return on equity 13.07% 18.2%

9. Debt ratio 22.02% 50.0%

10. Profit margin on sales 16.6% 3.5%

11. P/E ratio 5.0 x 6.0 x

12. Price/cash flow ratio 0.948 x 3.5 x